Saturday, 13 December 2008

Tara Smith wrote an arresting article on "The Menace of Pragmatism" in the Fall 2008 issue of The Objective Standard. She explained that

[w]hile pragmatism presents itself as a tool of reason and enjoys the image of mature moderation, of common sense and practical "realism," in truth it is anything but realistic or practical. Pragmatism has become a highly corrosive force in people's thinking.

Later on she identifies the key features of the pragmatic style (it could hardly be called a method) of thinking:

A short-range perspective

The inability (or refusal) to think in principle.

The denial of definite identity.

The refusal to rule out possibilities.

Professor Smith's article has many examples; but I came upon a concretisation of the psychological process involved in a totally different source, a World War II thriller I'm reading [The Polish Officer by Alan Furst].

It snowed, early in November, and those who read signs and portents in the weather saw malevolence in it. The Germans had lost no time stealing Polish coal, the open railcars rattled ceaselessly across the Oder bridges into ancient, warlike Prussia. The men who ran the coal companies in ancient, warlike Prussia were astonished at how much money they made in this way - commercial logic had always been based on buying a little lower, selling a little higher. But buying for virtually nothing, well, perhaps the wife ought to have the diamond leaf-pin after all. Hitler was scary, he gave those huge, towering, patriotic speeches on the radio, that meant war for God's sake, and war ruined business, in the long run, and worse. But this, this wasn't exactly war - this was a form of mercantile heaven, and who got hurt? A few Poles?

The thugs in charge of economic regulation in Britain and America, like the Fascists of the 1930s, are getting away with a course of action that verges on insanity and can only lead to ruin. As far as Britain's Gordon Brown is concerned, borrowing billions from the producers of the future works quite well in the short run, because the opinion polls report that his popularity has increased, and other European politicians have praised him for his economic leadership. It's true that injecting all those billions of nonexistent money into the economy doesn't seem to have eased the flow of credit much yet... But perhaps, somehow, Keynesian economics will succeed this time round, if only government ministers can bully financial institutions into making magic work.

Friday, 12 December 2008

Two recent articles, one by BBC reporter Robert Peston in the Times Online, and one by Ayn Rand Institute analyst Alex Epstein in the the Telegraph Blogs, present contrasting analyses of the economic crisis. Peston thinks capitalism will have to metamorphose:

A New Capitalism is likely to emerge from the rubble, one which may well seem fairer and less alienating than the model of the past 30 years. The system's salvation may require it to be kinder, gentler, less divisive, less of a casino in which the winner takes all.

Epstein says that the system we have had for the last hundred years is not capitalism at all:

[G]enuine capitalism was abandoned long ago in favor of a mixed economy - an unstable combination of economic freedom and economic coercion by government. Today's crisis, like the 1970s stagflation before it and the Great Depression before it, took place under, and is growing under, a mixed economy - not a free market.

Peston blames private enterprise:

Who's to blame? The short answer is all of us. But it's hard to mount a convincing argument against the notion that the most at fault were the banks and bankers - because they systematically failed to do what they were handsomely remunerated to do, which was to assess properly the risks of all that lending. Their survival as institutions now wholly depends on the goodwill of governments and taxpayers.

Epstein blames the crisis on the failure of decades of regulation:

In fact, today's crisis illustrates the evils of government intervention in the economy and vindicates supporters of laissez-faire capitalism. The traditional, laissez-faire view of government, held by thinkers such as philosopher Ayn Rand and economist Ludwig Von Mises, was that the sole purpose of government was to protect individuals rights against force and fraud.

This purpose necessitates, in Rand's words, "the abolition of any and all forms of government intervention in production and trade." Laissez-faire thinkers explained how any and all of the supposedly moderate, progressive government interventions in the economy, from the money-printing Federal Reserve to government insurance of failing banks, were morally unjust and economically disastrous.

Peston thinks the solution is still more government interference:

But the biggest lesson of all is that we are a million miles from having created the political and regulatory institutions to help us to contain the risks of globalisation. If the unfettered movement of capital, goods and services is going to survive, if there is not going to be a retreat into national fortresses that could impoverish all of us over the longer term, we will have to find a far better way of monitoring global risks and of bringing governments together to deal with them.

Epstein thinks the solution is laissez-faire capitalism:

To anyone who is unhappy with the direction the economy is going, take note: the free market philosophy has not failed-the unfree market philosophy has failed. Do your homework, speak up, and put the interventionists on the defensive.

Do you think that spending money you don't have, but that somebody else is going to have to earn, is a moral way to conduct economic affairs? Do you think that businessmen ought to be the servants of politicians? Do you think that forcing banks to make unsound loans is the way to cure a disaster brought about by government-induced imprudence? If not, read Alex Epstein's article in full (it is brief and clear) and follow his advice - if you do want to be free.